The challenge for the industry goes beyond ambition or investment. AI is advancing so quickly that traditional infrastructure design is struggling to keep pace. Each new model brings different power requirements, cooling needs, and networking architectures, creating a level of volatility that existing planning frameworks were never built to handle.

The scale of this pressure is already reflected in the data. Compute demand is projected to grow at 16% annually from 2023 to 2028. Real estate advisors expect total capacity to rise to 46% within just two years and nearly 180% by 2030.

The undeniable rise of AI applications, cloud migration, IoT, and low-latency digital services is driving organizations, including the world’s largest hyperscalers, to seek new locations that meet demand. But where will this growth happen when the usual markets can’t keep up? Increasingly, the answer points towards the Middle East, particularly the Gulf, which is rapidly becoming one of the world’s most strategic hubs for AI-ready infrastructure.

A STRATEGIC AI HUB

Across the region, a distinct combination of structural strengths is accelerating the scale of digital infrastructure. Johan Nilerud, Chief Strategy Officer at Khazna Data Centers, notes that capital is one of the most influential of these strengths. With state-backed entities investing heavily in AI, data centers, and digital platforms, financing friction is significantly reduced. This creates momentum for large-scale projects and attracts international partners seeking long-term stability.

This investment strength is already reshaping capacity across the Middle East. Data center build-out is expected to triple by 2030, with the GCC responsible for more than 60 percent of spending in the wider region. Nilerud points to initiatives such as the US–UAE AI Campus and Stargate UAE as examples of how governments are viewing digital infrastructure as a catalyst for economic transformation.

A strong sovereign wealth ecosystem reinforces this mindset. “State-backed entities like G42, MGX, and HUMAIN are deploying billions of dollars into AI, cloud, and data center infrastructure,” Nilerud says. “When capital is readily available, projects can scale faster and attract global partners who want access to well-funded, future-ready infrastructure.” He notes that this gives the region an advantage over markets where expansion often slows due to financing gaps or misaligned stakeholders.

Permitting plays a key role in this acceleration. Nilerud notes that government-led digital transformation strategies have created a regulatory environment designed for speed. “Clear national agendas and digital-first governance have created pathways that prioritize rapid deployment without sacrificing oversight,” he says.

State-level planning has supported digital government initiatives and created legislative clarity, resulting in faster approvals for major infrastructure projects.

Connectivity strengthens this position further. The region sits at the intersection of Europe, Asia, and Africa, supported by extensive subsea cable systems and robust domestic networks, especially in the UAE and Saudi Arabia. This gives hyperscalers a latency advantage and positions the Gulf as a natural anchor for cross-border digital expansion.

Energy is another major factor. According to Nilerud, the region benefits from both an abundant supply and long-term ambition. “From nuclear to some of the world’s largest solar installations, clean energy is becoming integral to the grid,” he says. Combined with advances in extreme-climate cooling and water reuse, the Gulf is developing infrastructure that can be built quickly, operated efficiently, and scaled sustainably.

Together, capital, permitting, connectivity, and clean energy are forming a market where global AI players can grow without the constraints seen elsewhere. As Nilerud describes it, the Middle East is becoming a strategic center of gravity for the next era of AI-ready infrastructure.

A REGION BUILT FOR SCALE

A defining advantage of the Middle East is the stability of its capital structures. Nilerud explains that large-scale investment from state-backed entities significantly changes the speed and risk profile of infrastructure development. In many established markets, he says, projects slow down due to fragmented funding cycles and lengthy evaluations. In the Middle East, sovereign wealth ecosystems support long-term strategy and clear execution.

Because this capital is abundant and aligned with national priorities, developers can move from planning to execution far more decisively. “Design, procurement, permitting, and partner onboarding can happen in parallel rather than sequentially,” he notes. For investors, this dramatically reduces execution risk. When projects are backed by entities with long-term vision, political alignment, and deep resources, “it becomes more bankable,” creating a stable environment for global operators to deploy at speed and scale.

Geography also plays a defining role. The region’s connection to Europe, Africa, and Asia, supported by extensive subsea route diversity, has created a foundation for international collaboration. Abu Dhabi, now recognized as one of the world’s top emerging data center markets, reflects this approach with infrastructure designed to grow alongside future compute demand.

With this connectivity established, and major initiatives such as the U.S. and OpenAI-led Stargate UAE advancing, the UAE is moving toward a surplus of capacity. This opens opportunities for countries in the Global South to host sovereign digital assets in the UAE. According to Nilerud, these emerging data and AI corridors are driving even greater urgency to scale.

WHY FUNDING MOVES FASTER

Scaling responsibly in harsh climates requires innovation, and Nilerud says Khazna has invested heavily in this direction. Cooling is a central focus. “We have pioneered the use of adiabatic free cooling systems, a solution tailored for high ambient temperatures,” he explains. This reduces reliance on mechanical chillers and significantly lowers energy and water consumption. Several facilities also use recycled, non-potable water, supporting national conservation priorities.

Energy sourcing is evolving as the UAE’s grid becomes cleaner. “We are progressively integrating clean power into our operations as the national grid decarbonizes,” Nilerud says. The country continues to expand nuclear and solar capacity, allowing data centers to benefit from cleaner energy without major retrofits. These strategies support a region-leading PUE of around 1.5, even as AI workloads become more demanding.

Environmental responsibility remains a key consideration. In the Middle East, extreme-climate engineering has driven innovation in cooling efficiency, redundancy, and construction practices. At Khazna, the same adiabatic free cooling approach that improves energy performance also “massively scales down water consumption.” Modular builds and smart sequencing follow a zero-waste model that reduces construction waste.

As clean energy adoption accelerates across the UAE, Khazna is aligning with the national net-zero target for 2050. Abu Dhabi’s nuclear power now contributes significantly to the grid, with a quarter of the UAE’s electricity coming from the Barakah Nuclear Energy Plant. In Dubai, the Mohammed bin Rashid Al Maktoum Solar Park is on track to deliver 5,000 MW by 2030. Nilerud says this combination of efficiency, engineering innovation, and clean energy integration is strengthening the country’s domestic capacity and increasingly becoming an advantage sought by international markets.

EXPORTING A NEW MODEL

Nilerud highlights the Lombardy AI Campus as a clear example of how UAE-grown expertise is now being exported. Developed by Khazna and Eni, the project will be Italy’s first AI data center campus powered by blue power, a decarbonized energy source generated through carbon capture. He notes that the UAE is transferring a mature, flexible infrastructure model that balances high performance with sustainability.

What makes the project significant is the alignment of AI-readiness, long-term sustainability, and sovereign digital capability. These principles were shaped by years of accelerated development in the Gulf and are now being adapted for European markets. As global AI infrastructure demand increases, the Middle East is emerging not only as a hub but also as a partner that can deliver sustainable, sovereign digital capacity abroad.

Looking ahead, Nilerud expects compute demand to rise sharply. Khazna is preparing by building infrastructure that anticipates future AI workloads. “Future-proofing means designing with flexibility, density, and scale in mind from the outset,” he says. The company’s newest facilities support high-density deployments and advanced cooling systems, such as direct liquid cooling, which are essential for hosting next-generation GPUs and AI chips.

“In essence, we’re enabling AI demand and growth with infrastructure that’s engineered for performance, speed, and sustainability,” he adds, a model the UAE is now confident taking to global markets.

Nilerud believes the world urgently needs a new approach to data infrastructure, one that prioritizes sustainability, scalability, and sovereignty. In his view, the Middle East, supported by companies like Khazna, is already delivering that model. For organizations seeking resilience, growth, and readiness for the next generation of AI, he sees a future that increasingly centers on the region.

As demand accelerates worldwide, he says the industry needs faster and more dependable paths to market. “AI needs a home,” he says. “Now more than ever, that home is in the Gulf.”